Games of chance: A policy change in The Netherlands?

The policy on gambling in The Netherlands is restrictive and Dutch law only contains limited possibilities for the offering and promoting of games of chance. Although until recently the Dutch authorities have not actively enforced these limitations, as the popularity of these games increases, particularly over the internet, a possible policy change seems to have taken place and enforcement actions are becoming more of a reality. This raises the question whether Dutch policies are in accordance with the EC Treaty.

Games of chance, and poker games in particular, have increased rapidly in popularity in the Dutch market. Not only are television shows frequently broadcasting tournaments and explanatory sessions, the offering of games of chance on the internet is also attracting plenty of public interest. Presumably triggered by reports that the participation in online gaming is increasing sharply in The Netherlands, the authorities are also paying more and more attention to gambling and to the issue of gambling addictions in particular.

At the European level too, the regulation of games of chance is receiving more attention. Contrary to the position adopted by the Dutch authorities, Europe seems to be sending ever stronger messages that national policies regarding the regulation of games of chance should not unnecessarily restrict the freedom of services contained in the EC Treaty.

The Dutch Gambling Act

The Dutch Gambling Act prohibits the organisation of games of chance and the promotion of participation in such games of chance, unless the operator has obtained an official licence from the authorities.

The Dutch authorities seem to pursue a rather restrictive or even protectionist policy with respect to granting licences to operators. At present, only a handful of Dutch operators have been granted licences and are allowed to offer games of chance on the national market. Holland Casino is presently the only operator allowed to exploit casino games in the country. Further, even after obtaining a licence, the licence holders are restricted in what they are allowed to offer. Some of the revenues from the games must, for example, vest in a public fund and the licence generally specifies what the maximum stakes of the games may be.

At this moment, the offering of games of chances on the internet is prohibited entirely. However, in order to obtain insight into and experience of the effects of online gaming, a legislative proposal has been submitted to the effect that an exclusive and temporary trial licence will be granted to Holland Casino.

Until recently, enforcement actions were mainly brought by the incumbents in the Dutch market, not by the judicial authorities. Presumably in light of increased public attention, this changed in February 2006 when the Ministry of Justice sent out warning letters to several hundred internet gambling sites summoning them to stop their activities immediately. The authorities report that over sixty per cent of the owners of these sites indeed stopped their online activities after the first warning. In addition to addressing illegal providers of games of chance, the authorities also indicated that they may initiate enforcement actions against credit card companies offering their services to Dutch residents that participate in foreign games of chance.

Jurisprudence

Under European law, there is no general regulation harmonising national legislation regarding the offering of games of chance. The Netherlandsis therefore free to implement its own policy in this area, provided of course that such a policy remains within the limits of the EC Treaty. The most relevant article of the EC Treaty in this respect is Article 49, which prohibits restrictions on the freedom to provide services within the European Community.

In various decisions, the European Court of Justice (ECJ) ruled that Member States may only impose restrictions on the freedom to provide services if such restrictions can be justified by imperative requirements in the general interest (e.g. Gambelli 2003). Such requirements may include, for example, the need for consumer protection, the prevention of fraud or the need to preserve public order.

In a recent decision with regard to national restrictions on the gambling market, the ECJ was even more explicit and stated that a licensing system may constitute an efficient mechanism enabling operators in the gaming sector to be controlled with a view to preventing crime but that such restrictions must genuinely contribute to the objective of preventing the exploitation of gaming activities for criminal or fraudulent purposes (Placanica, 2007).

Over the years, many cases have been brought before the Dutch courts by the licensed operators suing (foreign) operators that attempted to target the Dutch market without having obtained a licence. In such proceedings, the licensed operators generally take the position that the newcomers have an unfair commercial advantage as they are not bound by the various restrictions applicable to licence holders. In their defence, the non-licensed operators frequently challenge the restrictive gambling laws by arguing that the general prohibition as contained in the Dutch Gambling Act is in fact contrary to European law and a restriction on the freedom to provide services.

It can be questioned whether the restrictions imposed on the Dutch gambling market can in fact stand the European test of justification. The Ministry of Justice states on its website that the main purpose of the restricted policy regarding games of chance is to regulate and control games of chance. Particular attention is given to the objectives of discouraging addictions, protecting consumers and preventing crime. In various decisions, Dutch courts sided with the licensed operators and ruled that these motives indeed qualify as imperative requirements in the general interest. According to these Dutch courts, the Dutch Gambling Act, insofar as it prohibits the organisation of games of chance in The Netherlands unless the provider has an official licence, is not contrary to European law.Most recently, this position was confirmed by the Council of State, the highest administrative court in The Netherlands, ruling that the monopoly position of Holland Casino is indeed justified on such grounds of public interest[1]. At present, even though the state monopoly model in the gambling industry is facing criticism at the European level, the Dutch authorities stand by their restrictive policy and find themselves backed by the national courts.

In conclusion, the gaming sector is under scrutiny at both the national and the European level. The Dutch authorities recently started to actively enforce its restrictive policy whereas this had previously been left to the licensed operators on a private basis. Although the Dutch courts take the position that the state monopoly model is EC-proof, it would not be surprising in light of recent jurisprudence of the ECJ if this position were to be further challenged in the future.

[1]Administrative Law Division of the Council of State (Afdeling bestuursrechtspraak van de Raad van State), 14 March 2007, nr. 200600283/1.